In today’s briefing:
- Yum China Pursues Primary Listing Conversion On The HKEx
- Bright Scholar: Cheap Homecoming, Yet Limited Downside
- Xiamen Port (3378 HK)’s Composite Doc Out; Shareholders To Vote On 16 Sept
- Kunlun Energy (135 HK): An Excellent Show
- Kuaishou (1024 HK): 2Q22, Many Encouraging Points Behind “Slowdown”, 48% Upside
- Leapmotor IPO: The Bull Case
- Xiamen Port’s H Share Class Meeting on 16 September
- Kuaishou: Profitability to Improve Further with Monetisation of Overseas Business
- China Tourism Group A/H Trading – Decent Support from Long-Only but Minimal Retail Participation
- Canvest Env (1381 HK): Streaming Ahead Despite Tough Time
Yum China Pursues Primary Listing Conversion On The HKEx
- Last week Yum China Holdings Inc (9987 HK) announced it has applied for voluntary conversion to a primary listing on the Hong Kong Stock Exchange.
- Should all necessary approvals from the HKEx be satisfied, Yum will become dual primary listed on the New York Stock Exchange and the HKEx.
- This regulatory process, facilitated by rules introduced by the HKEx over the past year, enables the de-listing of the ADRs and the smooth transition to a sole HK listing.
Bright Scholar: Cheap Homecoming, Yet Limited Downside
- Bright Scholar Education (BEDU US) (BSE), an operator of schools across China, the UK, and the US, received an Offer earlier this year from Huiyan Yang, the chairperson.
- Yang is offering US$3.32/ADS – adjusted for the recent reverse split – a 44% premium to the undisturbed price.
- Yang controls 92.5% of the votes. There is no shareholder vote on this transaction should a firm Offer unfold.
Xiamen Port (3378 HK)’s Composite Doc Out; Shareholders To Vote On 16 Sept
- Back on 2 June, SOE terminal operator Xiamen International Port (3378 HK) announced a pre-conditional Offer of $2.25/share from Xiamen Port Holding, a Fujian SASAC-controlled entity.
- The pre-conditions – NDRC, MoC, SAFE, and CSRC – were fulfilled on the 16 August.
- The Composite Doc is now out. The H-class meeting will be held on the 16 September. There is no tendering condition. Payment should be the 6 October.
Kunlun Energy (135 HK): An Excellent Show
- With an 18.6% growth in 1H22 profit from continuing operations, Kunlun Energy (135 HK) has not disappointed us. Natural gas sales segment is a bright spot with solid growth.
- Net cash swelled to Rmb10.2bn at end-Jun, about 2x more than the level at end-FY21. We estimate this roughly equals to 19% of the current share price.
- New project momentum looks healthy and the market seems to have underestimated FY22 earnings. Its 8x and 7.5x PERs for FY22 and FY23 are clearly attractive.
Kuaishou (1024 HK): 2Q22, Many Encouraging Points Behind “Slowdown”, 48% Upside
- In 2Q22, the company’s adverting revenue increased by 11% YoY, while the market size shrank by 8% YoY.
- The company raised both of its user base and Time Spent per Daily Active User.
- The company’s operating margin continued to shrink due to the layoff at the beginning of this year.
Leapmotor IPO: The Bull Case
- Leapmotor (2007699D HK), a Chinese EV manufacturer, will start its listing hearing for a US$1.5 billion HKEx IPO this week, according to press reports.
- Leapmotor ranked fifth among the global pure-play EV companies and fourth among the pure-play EV companies based in China as measured by sales volume in 2021.
- The key elements of the bull case rest on a solid roadmap, executive capabilities, explosive growth, declining loss margin and declining FCF burn.
Xiamen Port’s H Share Class Meeting on 16 September
- Xiamen International Port H (3378 HK)‘s composite document is out with the H Shareholders’ class meeting scheduled for 16 September. The IFA considers the offer to be fair and reasonable.
- The key conditions are approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders’ rejection). There is no minimum acceptance condition.
- This is a done deal. At last close and for a 6 October payment, the gross and annualised spread to the offer is 0.9% and 7.6%, respectively.
Kuaishou: Profitability to Improve Further with Monetisation of Overseas Business
- Kuaishou Technology (1024 HK) reported 2Q2022 results today. Revenue grew 13.4% YoY to RMB21.7bn (vs consensus RMB20.7bn) while reported operating losses dropped to RMB3.1bn (vs consensus RMB4.6bn).
- Though top line growth of online marketing services has been declining, the company managed to report growth while peers have been facing decrease in revenues.
- Kuaishou’s domestic biz has turned profitable at the OPM line while there has been significant decrease in Op. losses from the overseas segment.
China Tourism Group A/H Trading – Decent Support from Long-Only but Minimal Retail Participation
- China Tourism Group Duty Free Corporation Limited (CDF) raised around US$2.4bn in its H-share listing in Hong Kong, after pricing its IPO at HKD158/share.
- As per Frost & Sullivan, CDF had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.
- In this note, we talk about the deal pricing and the trading dynamics.
Canvest Env (1381 HK): Streaming Ahead Despite Tough Time
- The 25.6% increase in net profit for Canvest Environmental Protection Group (1381 HK) in 1H22 is a resilient show given cost inflation and pandemic/lockdowns in the period.
- Good pipeline should support growth for the next two years as projects under construction/planning accounted for 54% of the existing capacity in Aug.
- Canvest’s expectation that gearing has peaked suggests that it will start deleverage in next year. This is a positive message in an industry traditionally with weak cashflow.
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